Jeffrey D. Sadow is an associate professor of political science at Louisiana State University Shreveport. If you're an elected official, political operative or anyone else upset at his views, don't go bothering LSUS or LSU System officials about that because these are his own views solely.
This publishes Sunday through Thursday with the exception of 7 holidays. Also check out his Louisiana Legislature Log especially during legislative sessions (in "Louisiana Politics Blog Roll" below).

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27.9.12

Vitter ignorant to think more govt solves power problems

Politicians who know better have thrown their support behind a statist
scheme that will make matters worse regarding power provision in emergencies,
when the solution to reduce the incidence of post-emergency problems lies in
the opposite direction.

Sen. David
Vitter, joined by Jefferson Parish President John Young, ask
state government to set in motion constitutional changes to allow any of a
private company, private/public partnership, or government to take over
forcibly a utility deemed to be underperforming. Incredibly, they argue
it “would inject real competitive pressure” into power provision.

Let’s see if we have this straight: according to these guys,
government’s bringing its power to bear to achieve an outcome it desires by
fiat, where the decision-making doesn’t have to have anything to do with
customer service but instead may be captive to fulfilling dozens of allied (on
this issue) different special interest agendas for dozens of different reasons,
is what defines “competition?” There’s zero guarantee that this action of
stripping a company of its assets, even at fair market value, would not reflect
a hidden agenda driven by political considerations.

Maybe some big campaign contributors who favor one company over another
for financial reasons want to bring down an opponent to be replaced with their
favored owner? Just fire up the proposed process, which will be just one step
removed from the corruption not rarely spawned when government
is given so much licensing power over one industry such as with waste storage.
Or how about activists pushing green power, which works in all but rare cases only
with massive subsidization, decide they want to oust an energy producer using
traditional oil, gas, coal, and/or nuclear? Just get enough of their fellow
travelers elected to the right offices, and they can spring this coup under
Vitter’s and Young’s plan.

There are far less potentially destructive options if you think
performance lags, as in this case spurred by days of power outages in parts of
Louisiana in the wake of Hurricane Isaac, and they rely on less government
interference. To understand this, it helps to know something of the complex
nature of power delivery.

It has three components: the producer, the transmitter, and the
distributor. The producer actually creates the power from some source. The
transmitter picks up the electricity and gets it to distribution points (except
for a few very large users that tap directly from transmission lines). The
distributor takes it, puts it into a usable form depending upon the end user,
and gets it to them.

In Louisiana, the three essentially are vertically integrated, dominated
by Entergy, but also including American Electric Power, Cleco, and many smaller
concerns public, private, and cooperative, although some act as retailer and
wholesaler in that they buy and sell power from others or that they generate.
This arrangement is becoming the exception, as deregulation of the industry
which began in earnest about 15 years ago has brought choice and competition to
many states. In essence, in these places at the single-user level you can buy
power from multiple sources, use different transmission lines depending on your
source, but almost always have no choice for the final, distribution leg.

Isaac really only affected that distribution leg. Power was available
whether that meant importing it from outside the companies, and the storm
really didn’t disrupt the transmission lines. Only the storm knocking down and
around lines and transformers near end users affected delivery. And keep in
mind that whatever is in charge of the last mile of delivery has every
incentive to keep the power flowing, because if it doesn’t flow, it doesn’t
make money. Thus, market pressures provide every encouragement to have power
interruptions solved as quickly as possible.

Relevant to the current situation, it means by taking this further
eventually governments could treat the distributor as they do the cable
delivery industry – franchise out the infrastructure with renewable performance
contracts. If the distributor – which also could stay in business in the other
two sectors – doesn’t meet certain standards during the contract, it can be
penalized, but the specter of losing the deal at renewal time should be more than
enough for them to maximize delivery efforts.

Even if Louisiana doesn’t want to go this far in the right direction,
an intermediate stop would be the PSC setting up performance bonds with
distributors, where they put up money that the PSC could rule to tap into if
certain standards aren’t met. As weak as this might be compared to
deregulation, it beats the current standard where the five politicians that make
up the PSC can decide on any basis whether to fine or impose sanctions on
companies (as the PSC
will investigate relative to Isaac) based upon their perception of public
actions that do not require to be linked to any data-driven outcomes.

There’s no excuse for Vitter and Young not to know that less, rather
than more, government involvement holds out hope for service improvement. His
idea only interjects more politics into service provision, counter to national
trends, that will not improve things and where instead introduction of more
market discipline will.

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